Yanis Varoufakis: Europe can't afford to let Athens go under

REUTERS/Marko DjuricaA statue of Godess Athena is silhouetted against the rising sun in Athens, Greece June 25, 2015. Greece’s ruling Syriza party dismissed reform demands from the country’s international creditors as ‘blackmail’ on Thursday as crisis talks to avert a debt default and a euro zone exit entered a critical phase.

Europe will lose a trillion euros if it allows Greece to go under, the country’s finance minister said on Saturday, accusing creditors of ‘terrorizing’ Greeks into accepting austerity in a referendum on bailout terms.

After a week in which Greece defaulted, closed its banks and began rationing cash, Greeks vote on Sunday on whether to accept or reject tough conditions sought by international creditors to extend a lending lifeline keeping the country afloat.

Their decision could determine Greece’s future as a member of the single currency.

Addressing a crowd of over 50,000 in central Athens, left-wing Prime Minister Alexis Tsipras urged them to spurn the deal, rejecting warnings from Greece’s European partners that this may bring an exit from the euro and even greater hardship.

A slew of opinion polls on Friday gave the “Yes” camp, which favours accepting the bailout terms, a slender lead but all were within the margin of error and pollsters said the vote was too close to call. Only one had the “No” vote advocated by the government winning.

Tsipras’ finance minister, Yanis Varoufakis, said there was too much at stake for Europe to cast Greece adrift.

“As much for Greece as for Europe, I’m sure,” Varoufakis told the Spanish newspaper El Mundo. “If Greece crashes, a trillion euros (the equivalent of Spain’s GDP) will be lost. It’s too much money and I don’t believe Europe could allow it.”

“What they’re doing with Greece has a name: terrorism,” said Varoufakis. “Why have they forced us to close the banks? To frighten people. And when it’s about spreading terror, that is known as terrorism.”

Athens’ 18 partners in the euro zone say they can easily absorb the fallout from losing Greece, which accounts for barely 2 per cent of the bloc’s economic output. But it would represent a massive blow to the prestige of Europe’s grand project to bind its nations into a union they said was unbreakable.

“For Europe, this would be easy to manage economically,” Austrian Finance Minister Hans Joerg Schelling said in an interview with online newspaper Die Presse. For Greece, however, “it would indeed be considerably more dramatic.”

Schelling said Greece would need humanitarian aid in case of a Grexit but described fears of widespread poverty as exaggerated and part of “a propaganda war”.

Capital controls imposed by the government this week have driven home for many Greeks the catastrophe they face if the country exits the euro and is forced to turn to a new, heavily-devalued currency.

Finance Minister Wolfgang Schaeuble of Germany, Greece’s biggest creditor and toughest critic, appeared to suggest Greece may be left without the euro currency “temporarily”.

“Greece is a member of the euro zone. There’s no doubt about that. Whether with the euro or temporarily without it: only the Greeks can answer this question. And it is clear that we will not leave the people in the lurch,” Schaeuble told top-selling newspaper Bild in an interview.

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